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Aligning Leadership, Activating Culture Change

LEADING TRANSFORMATION - 2018 CEO SUMMIT REPORT

Part 2

As these firms have shown, pursuing “new and different” growth outside the traditional core requires new organizational structures as well as visionary leadership.

To come to a new understanding of how leaders can best navigate new growth, delegates and presenters at both of our 2018 CEO Summit events—held in Munich in June and

Boston in August—traded insights on organizational alignment and leading culture change across the enterprise.

In Part 2 of our summit series, we are focusing on organizational issues that were brought to life at the Munich event at the state-of-the-art Steelcase Learning + Innovation Center. (See Part 1, on disruption and driving growth, here.)

CREATING THE AGILE ORGANIZATIONLarge companies are notorious for moving slowly, as they are weighed down by the inertia of the way things have always been done. That’s why leaders of Daimler AG believed they had to accelerate organizational agility in order to capture big opportunities in transportation

around what it calls CASE: connected, autonomous, shared services, and electric powertrains.

In a Q&A with Innosight co-founder and HBS professor Clay Christensen, Daimler board of management member Wilfried Porth told the story of how the 280,000-employee, €164 billion automaker is remaking its culture, starting with a survey asking

Daimler AG no longer just sells its automobiles but has launched Europe’s largest car-sharing service, so that customers can use their smart phone to rent nearby vehicles by the minute.

Singapore’s DBS Bank redesigned its tradition-bound culture by becoming a “26,000-person startup,” a customer-obsessed, data-driven learning organization creating digital platforms for its global expansion.

Steelcase is moving beyond furniture and physical office design to create a flexible “space-as-a-service” business model, enabling workers to be productive anywhere and anytime.

Nestlé is transforming into a firm focused on research-driven nutrition, health, and wellness—by launching autonomously managed ventures.

Innosight co-founder Clay Christensen, who led both CEO Summit events, talks with BASF’s Guido Volt in Munich.

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all employees for input on how to redesign management practices.

The result was the Leadership 2020 initiative, based around principles such as less top-down hierarchy, more pilots, more feedback, more risk, more speed, more “wow!”

Specifically, employees stressed the need to work more autonomously, without upper management dominating. “We need to free up people reporting to us,” Porth said, “and people need to learn to do things without always getting instructions.”

Still, becoming more agile doesn’t mean losing confidence in core capabilities. “A car is the most complex product on Earth produced in mass,” Porth said. “A startup cannot

produce something like the Mercedes S-Class.” But newer competitorsfrom Tesla to Uber have shown howquickly things can change. And digitalplatform companies like Apple andGoogle are carving out roles in themobility as well. (see video)

As an example of how Daimler in recent years moved faster than many would have expected, Porth points to the Cars2Go venture, a sharing service for younger, urban consumers who don’t own cars. Drivers use their smart phone to locate available vehicles when they need them, rent them by the minute, and park them anywhere when done. Cars2Go has become the largest service of its kind in Europe, with 2.5 million members, 14,000 vehicles, and is now in 26 cities as it has expanded to Asia and North America.

BREAKING THE CYCLE OF LEADERSHIP MISALIGNMENTDeveloping a new growth strategy that incorporates new capabilities and new business models is often

fraught with conflict among the senior leadership team. As Innosight managing partner Patrick Viguerie noted, typically one-third of the team wants to embrace change, one-third doesn’t, and one-third is on the fence.

Just as common is what happens after the senior team meets for an offsite retreat to agree on a plan for the future—only to leave the meeting and never actually implement the plan. “We have lots of discussions

every quarter among higher management,” said one delegate. “But by the time the team is supposed to move, there is an HR change. The ideas are in the air, or they disappear, and very little is produced.”

Innosight senior partner Scott Anthony framed the problem, citing an MIT study of 4,000 managers of which only 28% could correctly list three of their firms’ top priorities. The alignment challenge is even steeper,

Innosight’s Scott Anthony collaborates with Michaela Burger (Swarovski), Noland Townsend (Pfizer), and Jonathan Popper (Temasek).

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he said, when you consider common behavioral stumbling blocks ranging from “authority bias” (deferring to higher-ups without buying in) to “social loafing” (staying silent while watching others make decisions.) Fighting these biases requires new approaches to strategy models with deep team engagement.

Otherwise, blockers can undermine leadership teams as they embark on critical initiatives such as new growth or digital transformation. Senior teams may say they are aligned in the room, but divisions and doubts below the surface leading to them acting like they are not aligned. The result? Paralysis or promising initiatives getting derailed.

“Alignment is needed, but how do we do it?” asked Innosight senior partner Bernard Kümmerli.

To meet that challenge, he introduced an approach for overcoming this cycle of misalignment, built on three principles: establish common ground, surface misalignments, and get physical using participatory exercises.

Surfacing MisalignmentAnthony shared a case study from a global law firm to bring the second principle to life. The leadership team agreed that blockchain, artificial intelligence, and disruptive business models had the potential to reshape their market. However, the leaders disagreed on how significant each of these trends were and how much the firm should invest in response.

Using live polling software from Pigeonhole, each team member anonymously entered the amount they thought the firm should invest in new growth innovation. After the votes were cast, the data appeared as

a word cloud, with numbers attracting multiple votes appearing larger.

A summarized report would have shown that the average was 10 percent, with a standard deviation of 4 percent. But the discussion focused on the outliers: 2 and 20. A facilitator asked the people who submitted the lowest and highest numbers to reveal themselves and make the case for the extreme ends of investment. The discussion helped to identify the assumptions in which the low investment and high investment leaders agreed and, most critically, where they didn’t, such as the pace and scale at which those technologies would advance.

Focusing only on the average score would have obscured these differences, Anthony concluded, leading those at both extremes feeling disconnected from the apparent consensus. Once the team agreed on assumptions, members could do further focused research that resulted in an aligned plan to build the law firm of the future.

Walking the LineBringing alive the third principle, Kümmerli led the delegates in a 12-minute exercise called “walk the line.” The goal of the exercise is to have people physically stake out their position on an important question as a way to reveal misalignment, overcome bias and increase group energy. It is based on research that suggests that physically enacting difficult ideas can be a more effective way to bring them to life and encourage discussion than following conventional meeting etiquette of sitting, talking, and listening.

Inspired by the 2018 World Cup (then about to take place), the delegates

Bernard Kümmerli describes the leadership alignment challenge.

Innosight’s Kümmerli leads a “walk the line” demonstration. See the video to visualize the movement.

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walked the line by positioning themselves on a semi-circle of tape on the floor, marked with five spots according to how far they predicted Germany would advance in the Cup. Each participant argued their case with others and try to persuade colleagues, moving more and more delegates towards a consensus point, with most standing at the semi-final marker.

The exercise, along with structured dialogues and visualizations, can be powerful in helping senior teams

overcome misalignment in strategy-setting sessions. In a new Harvard Business Review article, “Unite Your Senior Team,“ Kümmerli and Anthony along with Markus Messerer describe how leadership at Swisscom used this approach to surface disagreement, overcome inertia, and converge on a growth strategy. The result was a strong consensus to invest in new growth ventures around opportunities in cloud security, blockchain, and automotive telematics.

CASE STORY: HOW DBS BECAME ‘BEST BANK IN THE WORLD’The story of Singapore’s DBS Bank shows that it is possible to overcome barriers to change and grow a large organization in new ways. Paul Cobban, Chief Data and Transformation Officer, described how he got in a taxi to report to his first day of work, and when he said his destination was DBS, the driver said, “You mean, ‘damn bloody slow?’” a reference to the notorious queues that plagued its ATMs.

After first focusing on performance issues, Cobban began working with the new CEO, Piyush Gupta, to tackle the wider cultural problems in the way of achieving its aspiration of “making banking joyful.” This involved transforming a traditional bank into “a 26,000-person startup,” a company with an entrepreneurial spirit for building digital products such as mobile payments and other global platforms for growth.

One key question: what exactly does a 26,000-person startup do on a day-to-day basis? Cobban and his team detailed five specific behaviors: agility, customer obsession, learning orientation, data-driven decision making, and experimentation.

Cobban and his team then helped employees routinely follow new behaviors. For example, to make customer obsession real, DBS leaders began to regularly spend time with customers and map their journeys using the lens of jobs-to-be-done, studying the functional, social, and emotional tasks people are trying to

accomplish in their daily lives. This effort highlighted innovative ways to improve the customer experience using new metrics such as measuring “customer hours.” This led to a savings of more than 250 million customer hours. Satisfaction ratings skyrocketed.

Cultural transformation also required isolating “blockers,” bottlenecks in team behavior, and overcoming them in a way that is non-threatening and fun. For instance, you can’t be data-driven if you fear HIPPOs, which is the tendency to always defer to the Highest Paid Person’s Opinion.

To overcome the HIPPO problem, DBS created MOJO, a way of making sure meetings are both

Paul Cobban tells how DBS transformed its culture and went from being a local bank to a global digital platform company.

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more productive and serve to strengthen the collaborative culture.

The “MO” is the meeting owner. Their responsibility is to ensure that the meeting is data driven, has a clear agenda, clear conclusions at the end, that it starts and ends on time, and that there is “equal share of voice” through the discussion. The “JO” is a joyful observer (which connects the role to a general theme at DBS to make banking joyful). At the end of the meeting they provide feedback to the MO about how they did. Not

only has this program doubled the effectiveness of meetings, it has provided the unexpected benefit of allowing people to provide feedback in a safe environment.

By breaking through these kind of cultural logjams and embracing a powerful story about its future, DBS has been able to reach record profits and revenue and also transform into a digital platform company that has twice won Euromoney’s Best Digital Bank Award and in 2018 was named Best Bank in the World.

Forward-Looking TakeawaysDelegates left both CEO Summit events with new models for operating their companies with a future-focused perspective integrating strategy, innovation, and leadership. Some of the messages that resonated included these insights:

STRATEGY & ORGANIZATION:While strategy is top-down, agile execution needs to be bottom up: Once the strategy is embraced, push decision making authority throughout the organization.

Remember that the riskiest option is to stay where you are: Incremental improvements aren’t enough; fortune favors those making bold moves into new growth territories.

Organize around your customer’s jobs to be done, not your products: Don’t focus exclusively on existing services, but rather the important objectives customers are trying to accomplish.

BEHAVIOR & CULTURE:Isolate specific “blockers,” bottlenecks in team behavior: Cultural transformation requires developing interventions for overcoming blockers in a way that is non-threatening and engaging.

Recognize common behavioral barriers: If every leader is not called on to participate in making strategy, phenomena like “authority bias” and “social loafing” can create the “illusion of unanimity” that will undermine leadership.

Expose conflict by making differences physically visible: Don’t sweep differences under the rug but force leaders to show where they stand, so that teams can engage in real debate about strategy.

Stay tuned for Part 3 of our 2018 CEO Summit report, in which we explore a “new leadership operating model” and new leadership literacies.

Martha Velando of COTY posts her takeaways.

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AVEVA Bruce Douglas Head of Integration and Corporate Strategy

BASF GROUP Dr. Guido Voit Managing Director, New Business GmbH

COTY Martha Velando Global Vice President, New Business Models

DAIMLER AG Wilfried Porth Member of the Board of Management, Head of Human Resources, and Director of Labor Relations, Mercedes-Benz Vans

DBS BANK Paul Cobban Chief Data & Transformation Officer

FORD Kevin Reynolds Executive Director of Business Strategy, EMEA

LIMA CORPORATE Eric Cohler Member of the Advisory Board

MITSUI & CO. EUROPE PLC Noriyuki Sato Executive Vice President & Executive Coordinator

MOBILEZONE HOLDING LTD Urs T. Fischer Chairman of the Board of Directors

NESTLÉ Valerio Nannini Senior Vice President, Head of Strategies & Performance

PFIZERR. Nolan Townsend Regional President, International Developed Markets, Pfizer Rare Disease

SANOFI-AVENTIS DEUTSCHLAND GMBHDr. Oliver Freichel Head of Global CHC Business Development & Licensing & Strategy

SOLVAY Nicolas Cudré-Mauroux Chief Technology Officer Thomas Canova R&D Portfolio Management Director

STEELCASEGuillaume Alvarez Senior Vice President, EMEA

STUDER GROUP B.G. Porter Chief Executive Officer

SWAROVSKI Michaela Burger Senior Vice President Transformation Officer & Innovation

SWISSCARD Markus Feller Head of Corporate Development & Business Transformation

TEMASEK INTERNATIONAL PTE LTD Jonathan Popper Managing Director, Structuring & Execution Managing Director, Investment

VERTIV INTEGRATED SYSTEMS GMBH Appal Chintapalli Vice President & General Manager, IT & Edge Infrastructure

CEO Summit 2018 - Steelcase Learning & Innovation Center, Munich, Germany

SUMMIT LEADERS

SUMMIT DELEGATES

Clayton M. Christensen The Kim B. Clark Professor of Business Administration, Harvard Business School, and Co-founder of Innosight

Bernard Kümmerli Senior Partner, Innosight

Patrick Viguerie Managing Partner, Innosight

Scott Anthony Senior Partner, Innosight

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